SEC Company Response from BATTALION OIL CORP (BATL) (CIK 0001282648) (BATL) — Nov 4, 2009
BATTALION OIL CORP (BATL) (CIK 0001282648)
Date: Nov. 4, 2009 · CIK: 0001282648 · Accession: 0000909334-09-000431
AI Filing Summary & Sentiment
Reasoning
File numbers found in text: 000-50682
Referenced dates: October 15, 2009
Letter
RAM Energy Resources, Inc.
Meridian Tower, Suite 650
5100 East Skelly Drive
Tulsa, Oklahoma 74135-6549
918.663.2800 FAX 918.663.9540
November 4, 2009
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-4628
Attn: Joanna Lam
Re:
RAM Energy Resources, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2008
Filed March 12, 2009
Response Letter dated October 15, 2009
File No. 000-50682
Ladies and Gentlemen:
This will acknowledge receipt of your comment letter of October 21, 2009 regarding the annual report on Form 10-K of RAM Energy Resources, Inc. (the “Company”) for its fiscal year ended December 31, 2008 filed March 12, 2009 and the Response Letter dated October 15, 2009. With respect to the comments, you are advised as follows:
Form 10-K for the Fiscal Year Ended December 31, 2008
Financial Statements
Note M - Supplementary Oil and Natural Gas Reserve Information, page 69
1.
We understand from your response to prior comment 2 that you would prefer not correcting the estimates of oil and gas reserves reported in your Form 10-K as of December 31, 2008, including the standardized measure and your ceiling test write-down, which were both impacted by the overstatement of reserves. We also understand that you would prefer not correcting the ceiling test write-down that you reported in your financial statements for the quarter ended March 31, 2009, also attributable to the overstatement of reserves.
We require additional information about your position on the materiality of these errors. Please address the following points.
Page 2 of 6
•
We believe that you would need to consider the significance of not correcting the error on not only the prior year financial statements but also the current year financial statements to comply with the guidance in SAB Topic 1:N. This guidance also requires that you evaluate the effects of the unadjusted error on each financial statement disclosure. Therefore, please explain your position on the significance of the error that you would expect for the six months ended June 30, 2009, the nine months ended September 30, 2009 and the year ended December 31, 2009.
The correction of this error would result in changes to depreciation and amortization expense as reflected in the following table. Depreciation and amortization expense would also be tax-effected.
Depreciation and amortization expense ($000s):
Quarter ended
Current Period
Year-to-date
Increase (Decrease):
March 31, 2009
(662)
(662)
June 30, 2009
(36)
September 30, 2009
December 31, 2009 (Estimated)
1,174
As Reported:
March 31, 2009
8,944
8,944
June 30, 2009
7,560
16,504
% Change:
March 31, 2009
-7.4%
-7.4%
June 30, 2009
8.3%
-0.2%
The overstatement of impairment expense does not correct or reverse until such time that an additional impairment expense is recognized. Additionally, depreciation and amortization adjustments recorded change the net book values used to calculate the ceiling test limitation impairment. Therefore, changes in depreciation and amortization expense for the quarter ended March 31, 2009 would result in an offsetting adjustment to impairment expense for the same period.
Page 3 of 6
•
Submit a schedule showing the impact of the error on the individual quantities of crude oil, natural gas, and natural gas liquids presented on page 71, both developed and the aggregate measures that you report. Also indicate the extent to which the individual line items in your roll-forward of reserve quantities for crude oil, natural gas, and natural gas liquids would be impacted if you were to proceed with the correction.
The impact of the error in the aggregate, and on proved developed reserves, is as shown in the table below.
Crude Oil
Natural Gas
NGL's
(Thousand
(Million
(Thousand
Barrels)
Cubic Feet)
Barrels)
As Reported:
December 31, 2007
19,544
93,358
4,271
Extensions and discoveries
19,435
1,126
Sales of reserves in place
(85)
(701)
-
Purchases of reserves in place
-
Revisions of previous quantity estimates
(4,568)
(3,633)
(428)
Production
(1,187)
(6,082)
(354)
December 31, 2008
14,496
102,512
4,615
Corrected:
December 31, 2007
19,544
93,358
4,271
Extensions and discoveries
18,647
1,071
Sales of reserves in place
(85)
(701)
-
Purchases of reserves in place
-
Revisions of previous quantity estimates
(4,769)
(8,405)
(663)
Production
(1,187)
(6,082)
(354)
December 31, 2008
14,285
96,952
4,325
% Change
-1.5%
-5.4%
-6.3%
Proved developed reserves:
As Reported:
December 31, 2008
9,235
59,717
2,710
Corrected:
December 31, 2008
9,235
57,635
2,705
% Change
0.0%
-3.5%
-0.2%
Page 4 of 6
•
Submit a schedule showing the impact of the error on the undiscounted future net cash flows and the standardized measure of future net cash flows that you report on page 72; and explain why the measures on that page do not correspond to the measures utilized in the materiality analysis included with your latest response. Also show the extent to which the individual line items in your roll-forward of the standardized measure would be impacted if you were to proceed with the correction.
The following tables show the impact of the error on the standardized measure of future net cash flows, and on the undiscounted future net cash flows.
As Reported
Corrected
% Change
Standardized measure of discounted future net
cash flows at beginning of year
$ 226,660
$ 179,741
$ 598,395
$ 598,395
0.0%
Changes during the year:
Sales and transfers of oil and natural gas
produced, net of production costs
(46,272)
(55,434)
(134,180)
(134,180)
0.0%
Net changes in prices and production costs
(97,697)
181,475
(545,183)
(538,042)
-1.3%
Extensions and discoveries, less related costs
30,560
11,444
77,851
77,239
-0.8%
Development costs incurred and revisions
(3,333)
(2,816)
(2,973)
5.6%
Sales of reserves in place
-
-
(5,143)
(5,143)
0.0%
Purchases of reserves in place
4,476
435,261
3,494
3,494
0.0%
Revisions of previous quantity estimates
2,107
41,042
(85,342)
(81,073)
-5.0%
Net change in income taxes
28,690
(223,002)
277,018
275,581
-0.5%
Accretion of discount
34,550
26,892
91,155
91,155
0.0%
Net change
(46,919)
418,654
(323,146)
(313,942)
-2.8%
Standardized measure of discounted future net
cash flows at end of year
$ 179,741
$ 598,395
$ 275,249
$ 284,453
3.3%
Page 5 of 6
As Reported
Corrected
% Change
Future cash inflows
894,626
2,722,099
1,294,803
1,253,537
-3.2%
Future production costs
(356,961)
(824,576)
(482,977)
(472,191)
-2.2%
Future development costs
(48,605)
(146,734)
(188,415)
(145,086)
-23.0%
Future income tax expenses (B)
(158,602)
(574,169)
(99,862)
(103,434)
3.6%
Future net cash flows (A)
330,458
1,176,620
523,549
532,826
1.8%
10% annual discount for estimated
timing of cash flows
(150,717)
(578,225)
(248,300)
(248,373)
0.0%
Standardized measure of discounted
future net cash flows
179,741
598,395
275,249
284,453
3.3%
Reconcile to pre-tax (A-B)
489,060
1,750,789
623,411
636,260
2.1%
The measures of 2008 future net cash flows of $523,549 are net of future income tax expense of $99,862. The measures of 2008 future net cash flows of $623,411 included in the materiality analysis in our response dated October 15, 2009 do not include future income tax expense.
•
Tell us the costs of the properties in question and explain how you have handled the corresponding values in recalculating your ceiling test. We expect this would entail a discussion clarifying whether you have utilized cost or estima
Show Raw Text
CORRESP
1
filename1.htm
RAM Energy Resources, Inc.
Meridian Tower, Suite 650
5100 East Skelly Drive
Tulsa, Oklahoma 74135-6549
918.663.2800 FAX 918.663.9540
November 4, 2009
Division of Corporation Finance
Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549-4628
Attn: Joanna Lam
Re:
RAM Energy Resources, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2008
Filed March 12, 2009
Response Letter dated October 15, 2009
File No. 000-50682
Ladies and Gentlemen:
This will acknowledge receipt of your comment letter of October 21, 2009 regarding the annual report on Form 10-K of RAM Energy Resources, Inc. (the “Company”) for its fiscal year ended December 31, 2008 filed March 12, 2009 and the Response Letter dated October 15, 2009. With respect to the comments, you are advised as follows:
Form 10-K for the Fiscal Year Ended December 31, 2008
Financial Statements
Note M - Supplementary Oil and Natural Gas Reserve Information, page 69
1.
We understand from your response to prior comment 2 that you would prefer not correcting the estimates of oil and gas reserves reported in your Form 10-K as of December 31, 2008, including the standardized measure and your ceiling test write-down, which were both impacted by the overstatement of reserves. We also understand that you would prefer
not correcting the ceiling test write-down that you reported in your financial statements for the quarter ended March 31, 2009, also attributable to the overstatement of reserves.
We require additional information about your position on the materiality of these errors. Please address the following points.
Page 2 of 6
•
We believe that you would need to consider the significance of not correcting the error on not only the prior year financial statements but also the current year financial statements to comply with the guidance in SAB Topic 1:N. This guidance also requires that you evaluate the effects of the unadjusted error on each financial statement
disclosure. Therefore, please explain your position on the significance of the error that you would expect for the six months ended June 30, 2009, the nine months ended September 30, 2009 and the year ended December 31, 2009.
The correction of this error would result in changes to depreciation and amortization expense as reflected in the following table. Depreciation and amortization expense would also be tax-effected.
Depreciation and amortization expense ($000s):
Quarter ended
Current Period
Year-to-date
Increase (Decrease):
March 31, 2009
(662)
(662)
June 30, 2009
626
(36)
September 30, 2009
605
569
December 31, 2009 (Estimated)
605
1,174
As Reported:
March 31, 2009
8,944
8,944
June 30, 2009
7,560
16,504
% Change:
March 31, 2009
-7.4%
-7.4%
June 30, 2009
8.3%
-0.2%
The overstatement of impairment expense does not correct or reverse until such time that an additional impairment expense is recognized. Additionally, depreciation and amortization adjustments recorded change the net book values used to calculate the ceiling test limitation impairment. Therefore, changes in depreciation and amortization expense for the quarter ended March
31, 2009 would result in an offsetting adjustment to impairment expense for the same period.
Page 3 of 6
•
Submit a schedule showing the impact of the error on the individual quantities of crude oil, natural gas, and natural gas liquids presented on page 71, both developed and the aggregate measures that you report. Also indicate the extent to which the individual line items in your roll-forward of reserve quantities for crude oil, natural gas, and
natural gas liquids would be impacted if you were to proceed with the correction.
The impact of the error in the aggregate, and on proved developed reserves, is as shown in the table below.
Crude Oil
Natural Gas
NGL's
(Thousand
(Million
(Thousand
Barrels)
Cubic Feet)
Barrels)
As Reported:
December 31, 2007
19,544
93,358
4,271
Extensions and discoveries
641
19,435
1,126
Sales of reserves in place
(85)
(701)
-
Purchases of reserves in place
151
135
-
Revisions of previous quantity estimates
(4,568)
(3,633)
(428)
Production
(1,187)
(6,082)
(354)
December 31, 2008
14,496
102,512
4,615
Corrected:
December 31, 2007
19,544
93,358
4,271
Extensions and discoveries
631
18,647
1,071
Sales of reserves in place
(85)
(701)
-
Purchases of reserves in place
151
135
-
Revisions of previous quantity estimates
(4,769)
(8,405)
(663)
Production
(1,187)
(6,082)
(354)
December 31, 2008
14,285
96,952
4,325
% Change
-1.5%
-5.4%
-6.3%
Proved developed reserves:
As Reported:
December 31, 2008
9,235
59,717
2,710
Corrected:
December 31, 2008
9,235
57,635
2,705
% Change
0.0%
-3.5%
-0.2%
Page 4 of 6
•
Submit a schedule showing the impact of the error on the undiscounted future net cash flows and the standardized measure of future net cash flows that you report on page 72; and explain why the measures on that page do not correspond to the measures utilized in the materiality analysis included with your latest response. Also show the extent to
which the individual line items in your roll-forward of the standardized measure would be impacted if you were to proceed with the correction.
The following tables show the impact of the error on the standardized measure of future net cash flows, and on the undiscounted future net cash flows.
As Reported
Corrected
2006
2007
2008
2008
% Change
Standardized measure of discounted future net
cash flows at beginning of year
$ 226,660
$ 179,741
$ 598,395
$ 598,395
0.0%
Changes during the year:
Sales and transfers of oil and natural gas
produced, net of production costs
(46,272)
(55,434)
(134,180)
(134,180)
0.0%
Net changes in prices and production costs
(97,697)
181,475
(545,183)
(538,042)
-1.3%
Extensions and discoveries, less related costs
30,560
11,444
77,851
77,239
-0.8%
Development costs incurred and revisions
(3,333)
976
(2,816)
(2,973)
5.6%
Sales of reserves in place
-
-
(5,143)
(5,143)
0.0%
Purchases of reserves in place
4,476
435,261
3,494
3,494
0.0%
Revisions of previous quantity estimates
2,107
41,042
(85,342)
(81,073)
-5.0%
Net change in income taxes
28,690
(223,002)
277,018
275,581
-0.5%
Accretion of discount
34,550
26,892
91,155
91,155
0.0%
Net change
(46,919)
418,654
(323,146)
(313,942)
-2.8%
Standardized measure of discounted future net
cash flows at end of year
$ 179,741
$ 598,395
$ 275,249
$ 284,453
3.3%
Page 5 of 6
As Reported
Corrected
2006
2007
2008
2008
% Change
Future cash inflows
894,626
2,722,099
1,294,803
1,253,537
-3.2%
Future production costs
(356,961)
(824,576)
(482,977)
(472,191)
-2.2%
Future development costs
(48,605)
(146,734)
(188,415)
(145,086)
-23.0%
Future income tax expenses (B)
(158,602)
(574,169)
(99,862)
(103,434)
3.6%
Future net cash flows (A)
330,458
1,176,620
523,549
532,826
1.8%
10% annual discount for estimated
timing of cash flows
(150,717)
(578,225)
(248,300)
(248,373)
0.0%
Standardized measure of discounted
future net cash flows
179,741
598,395
275,249
284,453
3.3%
Reconcile to pre-tax (A-B)
489,060
1,750,789
623,411
636,260
2.1%
The measures of 2008 future net cash flows of $523,549 are net of future income tax expense of $99,862. The measures of 2008 future net cash flows of $623,411 included in the materiality analysis in our response dated October 15, 2009 do not include future income tax expense.
•
Tell us the costs of the properties in question and explain how you have handled the corresponding values in recalculating your ceiling test. We expect this would entail a discussion clarifying whether you have utilized cost or estima